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Lou Dobbs Tonight

Interview With Senator Jay Rockefeller; Interview With Mary Matalin; Super Bowl Controversy

Aired February 02, 2004 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JOHN KING, CNN ANCHOR: Tonight, President Bush announces a presidential commission to investigate intelligence on Iraq and other rogue states.
(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I want to know all the facts.

(END VIDEO CLIP)

KING: Democrats want answers as soon as possible. Senator Jay Rockefeller, the top Democrat on the Intelligence Committee, will be my guest.

In "Exporting America," the federal government helps manufacturing workers who lose their jobs to cheap foreign labor, but gives no help to unemployed software programmers. We'll have a special report.

In "Broken Borders' tonight, the remarkable story of one family's battle to protect their home and their community from illegal aliens.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: The Border Patrol is totally overrun.

(END VIDEO CLIP)

KING: And, wardrobe malfunction or not, the Super Bowl halftime show by Janet Jackson and Justin Timberlake provokes a storm of protests. Federal regulators order an immediate investigation. CBS and MTV apologize for what they insist was an unscripted moment.

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, February 2. Sitting in for the vacationing Lou Dobbs, John King.

KING: Good evening.

President Bush today said he will appoint a presidential commission to review the quality of the intelligence he used for making the case for the war in Iraq. The commission will also take a broader look at intelligence about the spread of weapons of mass destruction and at what the administration calls outlaw regimes.

Just last week, the White House said a commission was not needed, but now the president says he wants all the facts. Senior Democrats immediately criticized the president's proposal.

White House correspondent Dana Bash reports -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, John, the president made the decision over the weekend that, instead of resisting growing calls for a commission to look into prewar intelligence on Iraq, it would be better to embrace it.

And today, he met privately with Dr. David Kay, the former chief U.S. weapons inspector, the man who last week shocked the White House by saying that no weapons would be found at all in Iraq. And that meeting went on as his top aides tried to get together this nine- person panel that the White House says will be modeled after the Warren Commission that looked at JFK's assassination. And, also, they say that this particular commission will not just look at Iraq, but it will look more broadly at possible problems in intelligence in North Korea and Iran.

(BEGIN VIDEO CLIP)

BUSH: But we also want to look at our war against proliferation and weapons of mass destruction kind of in a broader context. And so I'm putting together an independent, bipartisan commission to analyze where we stand, what we can do better as we fight this war against terror.

(END VIDEO CLIP)

BASH: Now, Democrats on the campaign trail and in Congress quickly criticized the idea of this particular kind of commission, because it's not going to be done through Congress, as for, example, the 9/11 Commission was. It will be done by the president by executive order.

They say that that puts into question whether or not this commission is truly independent. Democrats also say that the fact that this is expected to go through the campaign year, through the election, makes them ask whether or not this is actually a political ploy in announcing this commission.

Now, John, this comes as the latest CNN/"USA Today"/Gallup poll shows that most Americans don't think that the president actually misled them on weapons of mass destruction in Iraq, but they also are growingly impatient, growingly upset about the fact that the United States did go to war in Iraq, 10 points down. When asked whether or not it was worth it to go to war in Iraq, only 49 percent now say yes. That's down from 59 percent.

Now, John, as you can imagine, that is a figure that is causing some alarm here at the White House -- John.

KING: CNN's Dana Bash at White House, thank you very much.

And the presidential commission is likely to focus much of its intelligence on the Central Intelligence Agency. Critics say the CIA and other intelligence agencies are still not properly organized to deal with international terrorism and weapons of mass destruction.

National security correspondent David Ensor reports -- David.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: John, as the White House was announcing plans for a new panel to look into intelligence weaknesses prior to the Iraq war, some critics, particularly Democrats, were charging that the administration has ignored recommendations from past blue-ribbon panels, ideas that could have make a difference in reports that are now gathering dust.

(BEGIN VIDEO CLIP)

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: If 9/11 was a wakeup call, the failure to find weapons of mass destruction in Iraq was a report card on how far we have come since 9/11 in correcting the problems in our intelligence community. The grade we received on that report card is F.

(END VIDEO CLIP)

ENSOR: For example, past proposals include making the director of central intelligence a Cabinet-level job with real control over the intelligence agencies that now report to the Pentagon.

Past reports have also argued that America relies too much on high-tech gadgets and needs more old-fashioned human intelligence, more spies. Some former intelligence officials worry that, if the White House picks the panel and designs its mandate, the issue of whether the administration may have attempted to influence the intelligence product might not be addressed.

(BEGIN VIDEO CLIP)

KENNETH POLLACK, CNN ANALYST: It was a relentless series of questions. Any time they wrote something that did not seem to accord with what some members of the administration wanted to hear, they were subjected to a barrage of questions about their sources, about how they judged Iraq's intelligence, about how they made different judgments. And they were often asked to defend things that they wrote line by line, sentence by sentence, even word by word.

(END VIDEO CLIP)

ENSOR: Former CIA analyst Ken Pollack there describing what he says that those who are still in the intelligence agency have described to him.

Pollack stresses, however, that he does not know of any intelligence analyst who wrote anything that he or she did not believe to be true. If a new panel does come up with good ideas for the future, that would be fine, U.S. officials are saying today. But, with each new inquiry, they do point out that that means months of works for scores of CIA officers, scouring classified files for the inquiry, and that's time away from their day jobs, protecting the country -- John.

KING: David Ensor in Washington -- David, thank you very much.

Democratic Senator Jay Rockefeller is vice president of the Senate Intelligence Committee. He says the presidential commission should start its work as soon as possible. Senator Rockefeller will join us later from Washington.

But that brings us to the topic of tonight's poll question. Do you believe a commission assembled by the president to review prewar intelligence on Iraq can be truly independent, yes or no? Cast your vote at CNN.com/Lou. We'll bring you the results later in the show.

And one of the key issues for the presidential commission is the spread of nuclear weapons technology. Today, there are new and disturbing questions about the role of Pakistan, a close U.S. ally in the global war on terror. Pakistani officials said the man who built Pakistan's first nuclear bomb has admitted selling nuclear technology to North Korea, Iran and Libya.

Officials say he transferred drawings and machinery for about 10 years, starting in the late 1980s. The Pakistani government said it was not involved in those transfers.

Still to come, children on antidepressants. The government today launched an investigation into whether some antidepressants increase the risk of suicide.

(BEGIN VIDEO CLIP)

TERRI WILLIAMS, SON COMMITTED SUICIDE: After four weeks of treatment, he began to show signs of agitation, which we were not aware that that was a potential side effect.

(END VIDEO CLIP)

KING: Plus, the White House today sent Congress a budget of nearly $2.5 trillion for 2005. I'll be joined by Bush-Cheney campaign adviser Mary Matalin to talk about the president's election-year strategy.

And in "Exporting America," millions of Americans have lost their jobs to cheap overseas labor markets. But not all those Americans receive federal assistance for retraining.

Stay with us.

(COMMERCIAL BREAK)

KING: President Bush today sent Congress a budget of $2.4 trillion for next year. The budget would increase spending on defense and homeland security. The spending plan forecasts a record annual deficit of $521 billion, red ink the president is promising to sharply reduce in the years ahead.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE) KITTY PILGRIM, CNN CORRESPONDENT (voice-over): In this bulky budget which made its way up to Capitol Hill, security took top dollar and only 1 percent increases, less than the rate of inflation, on pretty much everything else.

BUSH: We're calling upon Congress to be wise with the taxpayers' money.

PILGRIM: The Department of Defense claims a little over $400 billion, a 7 percent increase, a nearly 10 percent increase in homeland security funding, including $900 million for aviation security, a 20 percent increase, $450 million for border security. Some Republicans were defending the spending on security.

REP. JIM NUSSLE (R), IOWA: Deficits make no difference at all, positive or negative, if you're not protecting the country.

PILGRIM: But 65 government programs were eliminated. And 63 were proposed for trimming. The Agriculture Department, Commerce, Health and Human Services, Justice, Transportation and the Treasury Department would all see funding decreased.

SEN. DON NICKLES (R), OKLAHOMA: There are some programs that, frankly, have a lot of waste.

PILGRIM: But the Democrats weren't buying it.

REP. JOHN SPRATT (D), SOUTH CAROLINA: You go down the list and we're not just talking about social programs. We're talking about infrastructure and research and development and things that are critically important for the future of this country.

PILGRIM: The greatest complaining was over the projected $500 billion deficit.

SEN. KENT CONRAD (D), NORTH DAKOTA: The president, under this plan will be spending $990,000 more per minute than he's taking in.

PILGRIM: Not included in this budget, as much as $50 billion for the cost of the war in Iraq and Afghanistan. The president told his Cabinet, the reason we are where we are is because we went through a recession, we were attacked, and we're fighting a war.

(END VIDEOTAPE)

PILGRIM: The budget provided fodder for the campaign trail. General Wesley Clark called it tax cuts for the rich and tough luck for everyone else. And John Kerry said, it's the same failed plan that caused the loss of 2.5 million jobs in the last three years.

John, very politicized already.

KING: Just beginning, the debate. Thank you, Kitty Pilgrim.

Later in the show, I will talk about the budget numbers and the budget politics with the director of the Office of Management and Budget, Joshua Bolten.

The democratic presidential hopefuls are facing another election- eve campaign swing tonight, ahead of primary and caucus contests in seven states tomorrow. Senator John Kerry, the current front-runner for the nomination, today visited Arizona and New Mexico and won another endorsement. New York Attorney General Eliot Spitzer said he believes Kerry will stand up to the special interests.

Tonight, Senator Kerry and four other candidates, including former Vermont Governor Howard Dean, are expected to answer questions in Phoenix for members of the League of United Latin American Citizens.

Elsewhere on the campaign trail, Senator John Edwards is focusing on tomorrow's primary in South Carolina. It's a contest Senator Edwards has said he must win. And the latest polls show him ahead. In addition to tomorrow's primaries in Arizona and South Carolina and the caucus in New Mexico, Democrats will vote in primaries in Missouri, Delaware, and Oklahoma. Another caucus will take place in North Dakota. A total of 269 delegates are at stake.

Whoever wins the Democratic nomination could face a close race against President Bush, at least according to the latest polls.

Earlier, I spoke with an adviser to the president's reelection campaign, Mary Matalin. And I began by asking her whether the president's decision to appoint that new commission to investigate intelligence failures marks a significant policy and political retreat.

(BEGIN VIDEOTAPE)

MARY MATALIN, BUSH-CHENEY CAMPAIGN ADVISER: The president's concerned, as well he should be, as well as anyone concerned about global peace and security should be. Clearly, something was amiss in the intelligence. Not just our intelligence. The intelligence from around the world. The intelligence that drove the United Nations' unanimous vote in the Security Council to disarm Saddam.

So there, to the extent that we need to fix something, that is obviously what the president wants to do, looking into it. And those who would want to play politics with this very big and tough issue, as opposed to trying to figure out how to fix what led us astray, are not doing any service to America or peace around the world.

KING: Let's take a look at the campaign. You are on the road, a number of Bush-Cheney surrogates out on the road at a time the Democrats are hitting the president pretty hard. It appears to be having some effect, as voters listen to the Democrats, the president's polling numbers have changed.

I want to start with this one polling number, the current Democratic frontrunner is Democratic Senator John Kerry of Massachusetts. In a new CNN poll out today, Senator Kerry beats the president, 53 percent to 46 percent, in a hypothetical November head- to-head. A sign to you that, as the campaign unfolds, the president's position is weakening?

MATALIN: No. There hasn't been a campaign, John, as you know. They're all over the field. We're not evens suited up. And their whole, entire campaign strategy has been to just bash Bush. If they think that they're going to win by purely and solely attacking the president, not offering any alternatives, they're sorely mistaken. And the president has yet to get out there and campaign. He has a spectacular record to run on.

Three years ago, there was -- our military did not have its resources in place to protect us. We didn't have Homeland Security. We did not have a strategy for education. We had no health care reform. We have a spectacular record to run on. We're looking forward to running on it.

But more importantly, we have a vision for the future. They don't have a vision for the future. They don't have any platform for the future. They have one and only one campaign strategy, and that's to beat up on the president. So...

KING: You call it "beating up on the president," Mary, but whatever it is, it is having an impact. If you look at the same poll, as well, our new poll, the president's approval rating, now at 49 percent. Just a couple of weeks ago, it was at 53 percent. One month ago, it was at 60 percent.

The president is clearly descending in terms of his approval rating.

MATALIN: We are really looking forward to having their -- choose their nominee, so we can compare and contrast our record to his record and our vision for the future to theirs. And then we'll see where the numbers are.

This is nothing more than had been predicted by the campaign, that these numbers would dip after a period of time. When there's no defense, there's no correction of all the untruths that they've been putting out there, this is what happens.

KING: We will know a lot more tomorrow night after the seven contests, including the primary in South Carolina and elsewhere, but is it the campaign assumption right now that John Kerry will be the Democratic nominee?

MATALIN: It's hard to make assumptions about the other side. We have nothing to do with their process. It's been interesting to watch. And we -- you know, it looks like that, but you know, two weeks ago, the punditocracy thought it would be Dr. Dean. So we'll see.

KING: The punditocracy. On that note, Mary Matalin, we need to end. Thank you very much for joining us from St. Louis.

MATALIN: Thanks, John. Thanks for having me. (END VIDEOTAPE)

KING: Coming up next, a growing controversy over whether children should be allowed to take antidepressant drugs designed for adults.

Plus, our special report, "Broken Borders." We'll meet an Arizona family so frustrated by the federal government's failure to keep illegal aliens out of the country, they're taking matters into their own hands -- those stories and a great deal more just ahead.

Stay with us.

(COMMERCIAL BREAK)

KING: Turning back now to the controversy over prewar intelligence on Iraq. Tonight, the British government said it is prepared to hold its own investigation into the intelligence used to justify the war in Iraq.

Earlier today, President Bush announced a presidential commission to review U.S. intelligence. Democratic Senator Jay Rockefeller is vice Chairman of the Senate Intelligence Committee. He says that presidential commission should start its work as soon as possible.

Senator Rockefeller joins me now from Capitol Hill.

Senator, thank you for joining us tonight. This is a commission called for by David Kay, the former chief weapons inspector, called for by many members of Congress, mostly Democrats, but some Republicans. And it now will be a commission appointed solely by the president, no input from members of Congress, at least no official authority by members of Congress to appoint its members.

Is that satisfactory to you, sir?

ROCKEFELLER: That's completely unsatisfactory, and for very plain and sensible reasons.

If the report is going to have any credibility with the American people or with the international community -- and we need both of those very much now -- it cannot be appointed by a president whose administration may be included in part of the inquiry and the investigation.

For example, was intelligence listened to? Was it used? Were there separate sources of intelligence? There are a lot of questions. What about the hyping of the whole thing? It's not just a question of prewar intelligence and what he wants to do. It's a question of all of the aspects of the administration, the Congress, and the intelligence community.

Look, the intelligence community was wrong about the intelligence. The Congress was wrong. The White House was wrong. It would be so much better if we all just admitted that, got our, you know, problems out of the way on that, and then went ahead and tried to make sure that this never happened again.

KING: But with the president controlling the appointees to this commission, you'll have a presidential commission. Your committee is looking at this. You've asked the committee to do even more than it is doing now. On the House side, they're looking at this. There are internal reviews in the administration.

Are we going to get three, four, five, reports, three, four, five answers, if you will, about what happened? And what happens then?

ROCKEFELLER: If we -- first of all, some of those groups are studying different things.

The Intelligence Committee, that I serve on, is only looking at a small amount of the problem. We're not looking at any possible involvement of the administration itself. We're not looking at the fact that intelligence changed radically between the year 2002 and 2003, that it became a much more pro-war type of intelligence. Was this influence from the White House or was it not? Was the president himself involved? Was Cheney involved? Was Rumsfeld involved?

These are not hostile questions. I presume nothing. But I want an honest report. The American people need that honest report. And so does the world community at this point.

KING: Has there been any outreach from the administration? Obviously, you disagree with the approach the president is going to take. One way to dial that back some would be for the president or the vice president to be in touch with fellow Democrats, like yourself, saying, suggest a name, Senator. Suggest a process through which we do this that is acceptable to you.

Any outreach like that?

ROCKEFELLER: No, no outreach to me, at least. And I've not talked to any Democrats that have been reached out to.

My suggestion would be to have a congressional committee mandated by the Congress to do this, with White House appointing people, with Republicans appointing people, Democrats appointing people, not necessarily within our own ranks, but have it a voice of the American people looking at accountability.

Look, I think this was a predetermined war. I may be right. I may be wrong. If I'm right, then that means that the White House was involved. And they have to be called to account to explain that I was either right or wrong. But if we can't talk to them, we'll never know that.

KING: Senator, this process, as outlined by the White House, is going to take months. Whether you like it or not, we're looking at a process that will take months. The committee's investigation will take months more.

What about right now? What do you say to the American people when we hear reports that now Pakistani government saying its top nuclear scientists did share secrets? We see the disclosure from Libya. We have the focus on Iran. There is the continuing mystery over what is happening in North Korea. What is the state of U.S. intelligence right now? And, in the short-term, is there one or two things that you think must be done at the CIA now, today?

ROCKEFELLER: We obviously have to -- I mean, that's the whole reason for us all to admit that we made a mistake on this and to go forward with integrating the American intelligence community, which is in fact 14 different agencies.

We have got so much work to do to prepare us for the world which is in fact upon us. And we're not doing it, because we're sort of looking around who to blame. I'm not trying to do that. But the American people -- one thing Americans do demand, and rightly so -- and we're unique in that -- is accountability. They want to know who was involved and not who is to be blamed, but what is the true story?

And you can only do that -- you can never do that if you have a president investigating his own administration, appointing his own people and them appointing their own staff.

KING: Senator Jay Rockefeller, vice chairman of the Senate Intelligence Committee, sir, we thank you for your thoughts on this issue tonight.

ROCKEFELLER: Thank you.

KING: I'm sure it will carry on into the months ahead.

And a reminder now to vote in tonight's poll. Do you believe a commission assembled by the president to review prewar intelligence on Iraq can be truly independent, yes or no? Cast your vote at CNN.com/Lou. And we'll share the results with you a little later.

Coming up, the biggest test so far for the Democratic presidential hopefuls. We'll talk to two of the nation's leading political journalists about tomorrow's big contest.

And in "Broken Borders," one Arizona family's personal fight against the flow of illegal aliens into their neighborhood.

And Janet Jackson's Super Bowl flash dance, was it a so-called wardrobe malfunction or a well-planned marketing scheme? We'll have that story and much more.

(COMMERCIAL BREAK)

KING: The Food and Drug Administration today launched an investigation into whether children and antidepressant drugs are a lethal combination. Parents who children committed suicide after taking the pills testified at an FDA hearing and pleaded with the agency to ban prescriptions of antidepressants to children.

Medical correspondent Christy Feig has the report -- Christy.

CHRISTY FEIG, CNN MEDICAL CORRESPONDENT: Well, John, it was indeed an emotional morning at that FDA Advisory Committee meeting. Some parents blamed their children's deaths on the very drugs they expected would stop their children's depression.

Terri Williams' 14-year-old son was on antidepressants.

(BEGIN VIDEO CLIP)

TERRI WILLIAMS, SON COMMITTED SUICIDE: After four weeks of treatment, he began to show signs of agitation, which we were not aware that was a potential side effect. And after seven weeks of treatment, he hung himself.

(END VIDEO CLIP)

FEIG: Still, other parents credit the exact same medication for saving their children's lives.

(BEGIN VIDEO CLIP)

DR. SUZANNE VOGEL-SCIBILIA, NATIONAL ALLIANCE FOR THE MENTALLY ILL: I have two children who have been on antidepressant medication, have done very, very well, and lead full lives. And so I shudder to think what would happen to them if these medications weren't available.

(END VIDEO CLIP)

FEIG: Now, only one of the antidepressants in this class of drugs has been approved for use in children, and that's Prozac. All of the other ones have been approved for use in adults only. But, by law, doctors can also prescribe them for use in children, and they do.

Take 2002, for example. More than 10 million prescriptions were written for five of these antidepressants, all in patients under the age of 18. Now, this issue first came to light last year, when the British government sent a warning to doctors there, telling them that certain antidepressants may actually increase a child's risk of committing suicide.

For now, the FDA has advised doctors here in the United States to monitor their pediatric patients very closely. But they have not said, don't prescribe them yet. They're going to analyze some more data that they've asked these pharmaceutical companies to provide. And they'll get their final recommendation out later this year -- John.

KING: Christy Feig in Washington, thank you very much.

And, tonight, the Democratic presidential hopefuls are campaigning across seven states slated to hold primaries and caucuses tomorrow. In total, those seven states represent 12 percent of the delegates needed to clinch the nomination.

Joining us now, two of the country's most respected political journalists who just returned from South Carolina. Ron Brownstein, national political correspondent for the "Los Angeles Times," and the CNN political analyst and Roger Simon, political editor of "U.S. News and World Report."

Gentleman thank you.

Let's start with our new poll out today. Very interesting findings. If you look at the head-to-head match ups, the president against the leading two Democrats, at least the leading two Democrats of recent weeks, against the current front-runner, John Kerry. John Kerry is running aid head right now, 53 percent to 46 percent. If you look at President Bush against the former Democrat Democratic front- runner, Governor Howard Dean, Bush gets 52 percent, 45 percent.

that has to help senator Kerry as he's campaigning for presidential votes -- yes, Roger.

ROGER SIMON, "U.S. NEWS & WORLD REPORT": Oh, sure. And I think we are seeing the result of almost a year of relentless attacks against the president. It's taken its toll. Obviously while the stock market is recovering, jobs are not recovering, there's no job creation going on in the United States. The future of the economy is still in question. The future of the Iraq occupation is still in question. And John Kerry at least looks like a reasonable alternative to those who were polled.

Ron Brownstein, Mary Matalin was on the program earlier, saying this is just what they expected. They are not worried the president's numbers are down. The Democrats have the stage to themselves.

Do you agree with that, this is simply the result of a Democratic attack or does the president have a larger problem?

RON BROWNSTEIN, "LOS ANGELES TIMES": I agree up to a point. I mean, obviously, the fact that they Democrats are dominating the news week after week making their case against the president is a factor here. And as Mary Matalin said, the Republicans have not begun really -- just starting to make their case against the Democrats. But the number that has to be more troubling than the head-to-head matchups is the approval rating. John, that really is the key variable in an election with an incumbent president. We've had an incumbent presidents with approval ratings well over 50 percent, they've all won comfortably for reelection. Whether Eisenhower, Nixon, Reagan or Clinton. Right now, we have President Bush down under 50 percent. At any time an incumbent gets there, it is going to be a difficult election. So that's the one that I keep the closest eye on through the election year.

KING: Now, Roger, help me understand, what happens after tomorrow night?

Seven contests, to hear the candidates they all plan to keep going after tomorrow. Joe Lieberman says he wants to win at least one state, Delaware is his target. General Clark says maybe Oklahoma. Senator Edwards, of course, has said he must win in South Carolina.

Is there a point and is it tomorrow night when this field has to shrink?

SIMON: I think there is, and I think it's going to start tomorrow night. If Joe Lieberman doesn't win anywhere, and he might not win anywhere, I think there's going to be a lot of pressure for him to get out of the race. I don't think he'll have any money. If General Clark doesn't win in Oklahoma, which he's very narrowly ahead in polls there, I think there will be pressure on him to leave. Edwards says he has to win South Carolina, his home state. He's a senator from the neighboring state. And that leaves Howard Dean, who isn't expected to win anywhere tomorrow, probably won't do better than third in any of those states but says he's still looking toward the future, he's looking toward Wisconsin and Maine and California, and Washington and states where he expects to do well.

KING: Ron Brownstein, can there be success to that strategy?

Dean essentially saying I'm not going to play this week because it would cost too much money and I might not win anyway, so I hope I'm the guy they come to as the anti-Kerry?

BROWNSTEIN: I think it's very tough obviously, John. The big problem, you saw it even in the national poll, Governor Dean, has had over the last month his credibility as a potential president has enormously eroded. I mean, he's not only trailing in the states, but performing woefully in polls when we ask questions who's best prepared to be commander in chief, who has the temperament to be president. He's lost a lot of credibility, and if you keep losing states it's hard to rebuild that credibility. All the Democrats have the same challenge. They have to find a case against the front-runner. The less to me, of the week between Iowa and New Hampshire and February third is, if you don't make -- if you don't give voters a compelling reason not to vote for the front-runner, guess what, most of them are going to do it. And I think the challenge for the Democrats, even if they can survive, John Edwards and Wesley Clark, is to find a sharper argument to make against John Kerry. John Edwards is relying on South Carolina almost entirely that he's from there. Well, you can't be from all 50 states. At some point you have to have a stronger argument than that. They've got to find it soon or Tennessee and Virginia could ring midnight for them.

KING: Roger we've seen in recent days, the pendulum if you will, swing the other way. It was Governor Dean getting a great deal of scrutiny two weeks ago. Now it is Senator Kerry. People questioning campaign contributions in the past. People looking through his record in the Senate.

How is he handling this?

SIMON: He's handling it as best as he can. I mean, all these guys face the same problem, and it's a problem that George Bush faces with the accusations that he was AWOL during his years in the Air National Guard in Texas. It's that nothing is really ever dead in politics. You really never put any issue behind you, if you're going to keep running for a higher elective office. Michael Dukakis thought Willy Horton was a dead issue, he had dealt with that. John Kerry says he's answered all of these charges. This is old stuff. Yes, he's taken money from lobbyists. No, he doesn't take PAC money. Yes, he takes money from special interests. And it's all behind him. But the fact is, that as long as you're going to keep running in campaigns, the media at the very least and your opponents at the very least are going to keep raising this stuff and trying to use it against you.

BROWNSTEIN: John, If I could just jump in there. One thing that's relevant here, I think, is that all the of the Democrats, to a considerable extent, have exposed themselves to this kind of argument. Because they're all relying so heavily on this very intense populism, anti-Washington argument, all portraying Washington as sort of a sink of corruption. The logical comeback from the media and certainly from the Republicans is John Kerry you took money from lobbyists. John Edwards, your taking money from trial lawyers. Wesley Clark, you were a lobbyist. I mean, they've all built glass houses that invite people to throw stones, and I think that's what they're experiencing.

KING: All right, gentleman, we need to end it there for tonight. Ron Brownstein of the "L.A. Times," Roger Simon, "U.S. News And World Report, thank you both gentleman.

Immigration reform has been one of the hotly debated issues on the campaign trail. Tonight, in our series of special reports "Broken Borders," one Arizona family fighting reform in their backyard. To this family the massive movement of illegal aliens in this country is a threat to their home and their livelihood.

Casey Wian, reports from Hereford, Arizona.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Like many parents Cindy Kolb takes here daughter to the bus stop every morning. But unlike most, she's packing a .38 to protect against the illegal aliens and smugglers that sneak through her rural Arizona community.

CINDY KOLB, ARIZONA BORDER RESIDENT: They slept in our neighborhood last night. They slept in our fields. And our kids walk past them going to the bus stop. They're under the roads. They're everywhere.

WIAN: Just seven miles from the Mexican border, Hereford has become a thoroughfare for illegal aliens.

KOLB: Border Patrol is totally overrun. There's no way that these men can collect up all the people that cross this border every night.

WIAN: So, Cindy and her husband Ed, along with some of their neighbors regularly patrol these mountains and gullies looking for illegal aliens.

KOLB: Here we go.

WIAN: It doesn't take long. (on camera): Less than five minutes after the Kolbs dropped their daughter off at the bus stop and just a few hundred yards down the road we encountered this group of suspected illegal aliens who were apprehended by an undercover border patrol agent.

(voice-over): Three days after our visit another local woman taking her daughter to school was car jacked by three illegal aliens who are now in custody. Critics call some of the citizens groups that patrol the Arizona border vigilante. They do apprehend people as this amateur video shows and detain them until the Border Patrol arrives. But they also give them food and water. The Kolbs say they never have drawn their weapons.

ED KOLB, ARIZONA BORDER RESIDENT: You never know who you're going to meet, and what country they're from. They are not just all from Mexico.

WIAN: Illustrating that point, we found this Brazilian bus ticket, along with discarded clothes, trash and human waste at one several local alien smuggler hiding spots. The environmental damage to their neighborhood is one reason this battle is personal for the Kolbs. There's also the failure of their construction business which they blame on illegal labor.

KOLB: We could never meet or win a bid because we paid American men living wages. And other contractors were hiring illegals, and paying them below minimum wage.

WIAN: Ed works for another company now while Cindy spends much of her time patrolling the neighborhood hoping to embarrass the federal government into controlling the border.

Casey Wian, CNN, Hereford, Arizona.

(END VIDEOTAPE)

Coming up next much more on the president's new spending plan with White House budget director Josh Bolten. Plus, "Exporting America." Software programmers whose jobs at IBM were shipped overseas are now taking on the federal government. That and a great deal more just ahead. Stay with us.

(COMMERCIAL BREAK)

KING: Exporting America tonight. Many of the hundreds of thousands of Americans who have lost their jobs to cheap foreign labor markets are eligible to receive help from the federal government. However, workers in the service sector are not. That has prompted former employees at IBM's global services division to file a lawsuit against the federal government. Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): If a worker makes these, or this, or works here and loses their job to foreign competition, they qualify for federal assistance under a program known as the trade adjustment act, which provides income support, training benefits and help with job searches. But if you're a software programmer who's lost a job to foreign competition, you don't qualify. Lisa Pineau, a software worker, is a plaintiff in a lawsuit which is seeking to change that.

LISA PINEAU, UNEMPLOYED SOFTWARE WORKER: I would like to retrain perhaps in another field that's more in demand. I don't believe there's a choice right now of staying in the tech field. Most of the jobs are pretty much being sent overseas.

TUCKER: The Labor Department will not comment on the pending suit, but they do point to the trade adjustment act reform of 2002, which says, the benefits are for workers who make products or articles. Software is not an article, says Labor, it is a service.

MICHAEL SMITH, PLAINTIFF'S ATTORNEY: Clearly the Labor Department has been entirely and completely incorrect in their determinations that software workers do not create an article.

TUCKER: In Congress, there are already efforts to accomplish legislatively what Smith is trying to do in the courts. Congressmen Adam Smith and Charles Rangel are preparing a bill they plan to introduce in the house in the next couple of weeks to extend benefits to workers of service companies. Clearing up any ambiguity in the law.

REP. ADAM SMITH (D), WASHINGTON: When people first started being concerned about jobs being lost to competition from overseas, it was primarily in the manufacturing sector. That is where the changes were occurring. While in the last four or five years, we've started to see it happening in the service sector as well.

(END VIDEOTAPE)

TUCKER: This is not the first time Congress has considered expanding benefits to the service sector. The reform of the trade adjustment act in 2002 originally included the service sector, but it was dropped from the bill because, John, Congress deemed it at the time too -- potentially too expensive.

KING: Thank you very much.

Now, returning now to one of our top stories. The president today sent Congress a new $2.4 trillion budget. My guest says the plan will put the White House on track to cut the $0.5 trillion deficit in half within five years. Joshua Bolten is the White House budget director. He joins us now from the White House.

Josh, nobody seems to be happy with this budget. I want to share with you some of the criticisms from your fellow Republicans on Capitol Hill tonight. The budget chairman, Jim Nussle, says Congress needs to look for ways, faster deficit reduction and to reduce spending. The appropriations chairman Bill Young, again another Republican says, your numbers simply do not add up. How do you answer that? JOSHUA BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Well, we're going to find people on all sides of the spectrum who are going to have concerns. We think we're putting forward the right kind of plan. Some folks are going to think we're not leaving enough room for spending, and other people are going to think we ought to tighten down some more.

The president's putting forward a good plan that meets the priorities of this nation, which are to protect the national security, protect the homeland, and restore robust economic growth to the economy. And then be tight with all the rest of our spending. That's what his plan does. We're bound to have a lot of divergence of views on the hill. But I think we've got a very good chance of getting this president's budget or something pretty close to it adopted on Capitol Hill.

KING: We know as we speak tonight that there will be U.S. troops in Afghanistan come November and December of this year. There will be some U.S. troops in Iraq come November and December of this year. The numbers still to be determined. And yet the budget does not include any money for them. The administration is saying it will revisit that question down the road when it has a better sense. Isn't that irresponsible in the sense that you know you will be spending something? Why would you not put that in the budget plan?

BOLTEN: Not at all The key is what you just said. We don't know what the number is and spending on contingencies and emergencies like a war are commonly handled through supplementals. But we haven't tried to hide that, we put it right in the front part of the budget document saying that for the coming year, we're going to need to spend something extra to support our troops in the field in Iraq and Afghanistan.

Right now, that spendout rate for '04 is somewhere below $50 billion. I would hope we could do something below that. But we don't know what the number is until we know what the security situation is like. And we'll put that into the budget when the time comes with a supplemental. There's no hiding going on here. Those numbers need to be added in.

KING: Critics say this president took office at a time of record federal surpluses, now has a budget that envisions record federal deficits. And what he's essentially saying is I'll cut the deficit in half in five years, promise, but you need to reelect me first.

BOLTEN: Look, let's revisit why we're in the situation we're in. The projected surpluses, while they were -- the projections were made in good faith by estimators all across the spectrum, just turned out to be flat wrong. Those surpluses didn't really exist. What we actually had was a recessionary economy which the president inherited, with a war on top of it. So given where we've been, it's not at all surprising that we're in the kind of deficit situation we're in.

The most important factor for the deficit situation we're in is in fact the flagging economy. The tax cuts that the president has proposed and the Congress has enacted are bringing us out of that flagging economy, and the worst thing we could do right now is think about raising taxes back up, because that will choke off economic growth, and that will choke off our ability to bring this deficit back down in a responsible way as the president's budget does.

KING: We are having this conversation in a campaign year. You're well aware of that. The Democrats look at this and they see a 7 percent cut in the Environmental Protection Agency. They see some housing programs that are being cut, or at least the growth scaled back. And they say this was a president who said he was a compassionate conservative. Where's the compassion?

BOLTEN: There's plenty of compassion in the budget, especially for those things the president has identified. When you look at the Environmental Protection Agency, we are finding cuts there, but not in the program dollars that they need to spend. We're finding administrative cuts, things like that. Housing spending is in fact going up, it's not going up as fast as some people would like. But people want to spend more on everything.

We can't spend more on everything. We need to focus on the priorities. And the priorities are, the national security, homeland security, and restoring robust economic growth. In the other areas we can meet our priorities, but what we also need to do is do some belt- tightening. We got a lot of support on Capitol Hill. I'm optimistic about this budget.

KING: Josh Bolten, optimistic tonight. We'll see how you do in the signing of this budget in the days and weeks ahead. Thank you for joining us.

BOLTEN: Thank you.

KING: And tonight's thought is on government spending. "Any government like any family can for a year spend a little more than it earns. But you and I know a continuation of that habit means the poorhouse." Those words from Franklin Delano Roosevelt.

Coming up. Another Jackson makes headlines. Outrage over Janet's halftime flash dance. The FCC calls for an immediate investigation. And we'll hear some of your thoughts on the issue.

(COMMERCIAL BREAK)

KING: The Super Bowl was by all accounts a fabulous game. Yet most of the attention tonight is coming from the halftime show. Public outrage over a revealing scene from that halftime show on CBS last night. One performer, Justin Timberlake, ripped off part of Janet Jackson's costume. A move many Americans felt was over the line. Among those who were offended, the chairman of the Federal Communications Commission, Michael Powell, who ordered an immediate investigation. Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): As they say in football, flag on the play. At first it appears to be illegal use of the hands, maybe unsportsman-like conduct. Justin Timberlake says it was a wardrobe malfunction. But on further review, many of those who watched at home said this little flash dance was no accident.

UNIDENTIFIED MALE: It was planned, and disgusting, and on public television. Very inappropriate.

UNIDENTIFIED FEMALE: I think it was on purpose.

TOURE, ROLLING STONE: Of course it was planned. Justin says, "I'm going to get you naked by the end of the song." He rips it off. It comes right off. And there's a silver pasty protecting what you can't see. Of course, she knew.

VILES: Among the angriest viewers, FCC Chairman Michael Powell, who ordered an immediate investigation, targeting MTV and CBS.

MICHAEL POWELL, FCC CHAIRMAN: I thought it was outrageous, and I was deeply disappointed as I sat there with my two children. And I knew immediately this would cause great outrage among the American people. Which it did.

VILES: In its apology, MTV, the producer of the incident said, quote, "The tearing of Janet Jackson's costume was unrehearsed, unplanned, completely unintentional." CBS, which aired it live, said it "deeply regrets the incident," apologized to anyone offended.

BRENT BOZELL, PARENTS TELEVISION COUNCIL: The blame game has got to stop with Viacom. Viacom owns CBS, Viacom owns MTV. The producers for CBS. Viacom is responsible, and the fines ought to go to every CBS affiliate owned by Viacom that aired this.

VILES: Now, we did find some viewers who were not offended.

UNIDENTIFIED MALE: Oh, I thought it was terrific. I thought it was great. Great. It was real great theater. I thought she was wonderful. And she was actually obviously prepared for it. She was wearing a pasty. So what's the big deal?

VILES: And lucky for CBS, the nation's first viewer, the president, didn't see it. He says he went to bed after the first half.

(END VIDEOTAPE)

VILES: This is, though, a serious case of bad timing for CBS. The FCC was already coming under pressure to crack down on indecency. And Powell says it is conceivable every single CBS affiliate could face a fine here. The fine per station would be $27,000 if they hit the maximum fine -- John.

KING: A deadline on when they'll make that decision?

VILES: No, they said they would do this very thoroughly and very quickly.

KING: Peter Viles, thank you very much. And now for a look at some of your thoughts. Many of you wrote about that incident during last night's halftime show of the Super Bowl.

Michael Garcia of Fullerton, California: "Good thing CBS didn't allow advocacy ads like MoveOn.org. Instead, CBS viewers were treated to flag desecration and exposed breasts. Good thing CBS has such high standards."

David Smith of Sacramento, California: "Let me try to understand this. We can investigate Janet Jackson's breasts immediately, but it will take months to find out who outed our CIA agent. I suggest that the apparently limitless funds of the FCC be shifted to an independent investigation of who the traitor is."

We love hearing from you. E-mail us, as always, at loudobbs@cnn.com.

Wall Street opened a new trading month. Little change. The Dow rose 11 points, the Nasdaq lost 3. The S&P added 4. Also in lower Manhattan, Martha Stewart's trial on fraud charges resumed after an unexpected delay last week. Christine Romans is here with the market and Martha -- Christine.

CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Well, John, first, defense stocks rallied very nicely today on that defense-heavy Bush budget proposal. So there was some strength there. But overall, market gains muted because Wall Street is obsessed with jobs growth. A manufacturing number was the best in 20 years. But the employment part of that number disappointed, and wages in December fell .3 percent. Many say the only winners in this job markets are the multi- national companies moving jobs overseas.

(BEGIN VIDEO CLIP)

RICHARD TRUMKA, SECRETARY TREASURER, AFL-CIO: Not only do they move offshore right now, we actually reward them through the tax code for moving offshore, and that is pure lunacy.

(END VIDEO CLIP)

ROMANS: AFL-CIO taking that case to Washington this week, and Wall Street waiting for Friday's jobs reports, John, for signs of life in this jobs market.

KING: So a few blocks from the stock exchange, Martha Stewart's stock trial continues. And?

ROMANS: And today it continued. More -- we're going to get the star witness tomorrow, but today a lot focusing on a rushed phone conversation December 2001. It was that day of her suspicious stock trade. A former ImClone assistant said a hurried and harsh Martha Stewart called ImClone and wanted to speak with founder Sam Waksal. He was unavailable, and the ImClone assistant entered in the phone log that day, John: "Martha Stewart. Something is going on with ImClone and she wants to know what." Stewart's accused, of course, of lying to authorities who were investigating her sale of ImClone stock that day, the day before bad news from the Food and Drug Administration. As I said, the star witness expected to take the stand tomorrow afternoon.

KING: Expected. Christine Romans, thank you very much.

And coming up, no winter break. The groundhog has made his prediction, and it's not pretty.

But first, an update of the list of companies our staff has confirmed to be exporting America. These are the U.S. companies either sending American jobs overseas, or choosing to employ cheap foreign labor instead of American workers. Tonight we add Sanmina- SCI. Please keep sending us the names of the companies you know to be exporting America that are not already on our list. For the companies list, the complete list, log on to cnn.com/lou. We'll be right back.

(COMMERCIAL BREAK)

KING: Now the result of tonight's poll. Three percent of you, 3 percent, believe a commission assembled by the president so review pre-war intelligence on Iraq can be truly independent; 97 percent of you say not.

And finally tonight, the verdict is in. The world's most renowned forecaster has issued his prediction. Punxsutawney Phil, the undisputed king of weather-forecasting rodents, emerged from his hole in the ground in Pennsylvania early this morning. He saw his shadow, which signals six more weeks of winter.

While Phil may be the gold standard when it comes to groundhogs, he has inspired wannabes across the country. Among them, French Creek Freddie of West Virginia, Buckeye Chuck from Ohio, and General Beauregard Lee from Georgia. But the Punxsutawney Groundhog Club says it welcomes the competition. They say, of course, imitation is the sincerest form of flattery. Either way, the forecast says bundle up for the next six weeks.

And that's our show tonight. Thanks for being with us. Tomorrow, Lou will be back, and he will be joined by the chairman of the House Ways & Means Committee, Congressman Bill Thomas. For all of us here, good night from New York. Anderson Cooper is next.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com





Mary Matalin; Super Bowl Controversy>


Aired February 2, 2004 - 18:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOHN KING, CNN ANCHOR: Tonight, President Bush announces a presidential commission to investigate intelligence on Iraq and other rogue states.
(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I want to know all the facts.

(END VIDEO CLIP)

KING: Democrats want answers as soon as possible. Senator Jay Rockefeller, the top Democrat on the Intelligence Committee, will be my guest.

In "Exporting America," the federal government helps manufacturing workers who lose their jobs to cheap foreign labor, but gives no help to unemployed software programmers. We'll have a special report.

In "Broken Borders' tonight, the remarkable story of one family's battle to protect their home and their community from illegal aliens.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: The Border Patrol is totally overrun.

(END VIDEO CLIP)

KING: And, wardrobe malfunction or not, the Super Bowl halftime show by Janet Jackson and Justin Timberlake provokes a storm of protests. Federal regulators order an immediate investigation. CBS and MTV apologize for what they insist was an unscripted moment.

ANNOUNCER: This is LOU DOBBS TONIGHT for Monday, February 2. Sitting in for the vacationing Lou Dobbs, John King.

KING: Good evening.

President Bush today said he will appoint a presidential commission to review the quality of the intelligence he used for making the case for the war in Iraq. The commission will also take a broader look at intelligence about the spread of weapons of mass destruction and at what the administration calls outlaw regimes.

Just last week, the White House said a commission was not needed, but now the president says he wants all the facts. Senior Democrats immediately criticized the president's proposal.

White House correspondent Dana Bash reports -- Dana.

DANA BASH, CNN WHITE HOUSE CORRESPONDENT: Well, John, the president made the decision over the weekend that, instead of resisting growing calls for a commission to look into prewar intelligence on Iraq, it would be better to embrace it.

And today, he met privately with Dr. David Kay, the former chief U.S. weapons inspector, the man who last week shocked the White House by saying that no weapons would be found at all in Iraq. And that meeting went on as his top aides tried to get together this nine- person panel that the White House says will be modeled after the Warren Commission that looked at JFK's assassination. And, also, they say that this particular commission will not just look at Iraq, but it will look more broadly at possible problems in intelligence in North Korea and Iran.

(BEGIN VIDEO CLIP)

BUSH: But we also want to look at our war against proliferation and weapons of mass destruction kind of in a broader context. And so I'm putting together an independent, bipartisan commission to analyze where we stand, what we can do better as we fight this war against terror.

(END VIDEO CLIP)

BASH: Now, Democrats on the campaign trail and in Congress quickly criticized the idea of this particular kind of commission, because it's not going to be done through Congress, as for, example, the 9/11 Commission was. It will be done by the president by executive order.

They say that that puts into question whether or not this commission is truly independent. Democrats also say that the fact that this is expected to go through the campaign year, through the election, makes them ask whether or not this is actually a political ploy in announcing this commission.

Now, John, this comes as the latest CNN/"USA Today"/Gallup poll shows that most Americans don't think that the president actually misled them on weapons of mass destruction in Iraq, but they also are growingly impatient, growingly upset about the fact that the United States did go to war in Iraq, 10 points down. When asked whether or not it was worth it to go to war in Iraq, only 49 percent now say yes. That's down from 59 percent.

Now, John, as you can imagine, that is a figure that is causing some alarm here at the White House -- John.

KING: CNN's Dana Bash at White House, thank you very much.

And the presidential commission is likely to focus much of its intelligence on the Central Intelligence Agency. Critics say the CIA and other intelligence agencies are still not properly organized to deal with international terrorism and weapons of mass destruction.

National security correspondent David Ensor reports -- David.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: John, as the White House was announcing plans for a new panel to look into intelligence weaknesses prior to the Iraq war, some critics, particularly Democrats, were charging that the administration has ignored recommendations from past blue-ribbon panels, ideas that could have make a difference in reports that are now gathering dust.

(BEGIN VIDEO CLIP)

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA: If 9/11 was a wakeup call, the failure to find weapons of mass destruction in Iraq was a report card on how far we have come since 9/11 in correcting the problems in our intelligence community. The grade we received on that report card is F.

(END VIDEO CLIP)

ENSOR: For example, past proposals include making the director of central intelligence a Cabinet-level job with real control over the intelligence agencies that now report to the Pentagon.

Past reports have also argued that America relies too much on high-tech gadgets and needs more old-fashioned human intelligence, more spies. Some former intelligence officials worry that, if the White House picks the panel and designs its mandate, the issue of whether the administration may have attempted to influence the intelligence product might not be addressed.

(BEGIN VIDEO CLIP)

KENNETH POLLACK, CNN ANALYST: It was a relentless series of questions. Any time they wrote something that did not seem to accord with what some members of the administration wanted to hear, they were subjected to a barrage of questions about their sources, about how they judged Iraq's intelligence, about how they made different judgments. And they were often asked to defend things that they wrote line by line, sentence by sentence, even word by word.

(END VIDEO CLIP)

ENSOR: Former CIA analyst Ken Pollack there describing what he says that those who are still in the intelligence agency have described to him.

Pollack stresses, however, that he does not know of any intelligence analyst who wrote anything that he or she did not believe to be true. If a new panel does come up with good ideas for the future, that would be fine, U.S. officials are saying today. But, with each new inquiry, they do point out that that means months of works for scores of CIA officers, scouring classified files for the inquiry, and that's time away from their day jobs, protecting the country -- John.

KING: David Ensor in Washington -- David, thank you very much.

Democratic Senator Jay Rockefeller is vice president of the Senate Intelligence Committee. He says the presidential commission should start its work as soon as possible. Senator Rockefeller will join us later from Washington.

But that brings us to the topic of tonight's poll question. Do you believe a commission assembled by the president to review prewar intelligence on Iraq can be truly independent, yes or no? Cast your vote at CNN.com/Lou. We'll bring you the results later in the show.

And one of the key issues for the presidential commission is the spread of nuclear weapons technology. Today, there are new and disturbing questions about the role of Pakistan, a close U.S. ally in the global war on terror. Pakistani officials said the man who built Pakistan's first nuclear bomb has admitted selling nuclear technology to North Korea, Iran and Libya.

Officials say he transferred drawings and machinery for about 10 years, starting in the late 1980s. The Pakistani government said it was not involved in those transfers.

Still to come, children on antidepressants. The government today launched an investigation into whether some antidepressants increase the risk of suicide.

(BEGIN VIDEO CLIP)

TERRI WILLIAMS, SON COMMITTED SUICIDE: After four weeks of treatment, he began to show signs of agitation, which we were not aware that that was a potential side effect.

(END VIDEO CLIP)

KING: Plus, the White House today sent Congress a budget of nearly $2.5 trillion for 2005. I'll be joined by Bush-Cheney campaign adviser Mary Matalin to talk about the president's election-year strategy.

And in "Exporting America," millions of Americans have lost their jobs to cheap overseas labor markets. But not all those Americans receive federal assistance for retraining.

Stay with us.

(COMMERCIAL BREAK)

KING: President Bush today sent Congress a budget of $2.4 trillion for next year. The budget would increase spending on defense and homeland security. The spending plan forecasts a record annual deficit of $521 billion, red ink the president is promising to sharply reduce in the years ahead.

Kitty Pilgrim reports.

(BEGIN VIDEOTAPE) KITTY PILGRIM, CNN CORRESPONDENT (voice-over): In this bulky budget which made its way up to Capitol Hill, security took top dollar and only 1 percent increases, less than the rate of inflation, on pretty much everything else.

BUSH: We're calling upon Congress to be wise with the taxpayers' money.

PILGRIM: The Department of Defense claims a little over $400 billion, a 7 percent increase, a nearly 10 percent increase in homeland security funding, including $900 million for aviation security, a 20 percent increase, $450 million for border security. Some Republicans were defending the spending on security.

REP. JIM NUSSLE (R), IOWA: Deficits make no difference at all, positive or negative, if you're not protecting the country.

PILGRIM: But 65 government programs were eliminated. And 63 were proposed for trimming. The Agriculture Department, Commerce, Health and Human Services, Justice, Transportation and the Treasury Department would all see funding decreased.

SEN. DON NICKLES (R), OKLAHOMA: There are some programs that, frankly, have a lot of waste.

PILGRIM: But the Democrats weren't buying it.

REP. JOHN SPRATT (D), SOUTH CAROLINA: You go down the list and we're not just talking about social programs. We're talking about infrastructure and research and development and things that are critically important for the future of this country.

PILGRIM: The greatest complaining was over the projected $500 billion deficit.

SEN. KENT CONRAD (D), NORTH DAKOTA: The president, under this plan will be spending $990,000 more per minute than he's taking in.

PILGRIM: Not included in this budget, as much as $50 billion for the cost of the war in Iraq and Afghanistan. The president told his Cabinet, the reason we are where we are is because we went through a recession, we were attacked, and we're fighting a war.

(END VIDEOTAPE)

PILGRIM: The budget provided fodder for the campaign trail. General Wesley Clark called it tax cuts for the rich and tough luck for everyone else. And John Kerry said, it's the same failed plan that caused the loss of 2.5 million jobs in the last three years.

John, very politicized already.

KING: Just beginning, the debate. Thank you, Kitty Pilgrim.

Later in the show, I will talk about the budget numbers and the budget politics with the director of the Office of Management and Budget, Joshua Bolten.

The democratic presidential hopefuls are facing another election- eve campaign swing tonight, ahead of primary and caucus contests in seven states tomorrow. Senator John Kerry, the current front-runner for the nomination, today visited Arizona and New Mexico and won another endorsement. New York Attorney General Eliot Spitzer said he believes Kerry will stand up to the special interests.

Tonight, Senator Kerry and four other candidates, including former Vermont Governor Howard Dean, are expected to answer questions in Phoenix for members of the League of United Latin American Citizens.

Elsewhere on the campaign trail, Senator John Edwards is focusing on tomorrow's primary in South Carolina. It's a contest Senator Edwards has said he must win. And the latest polls show him ahead. In addition to tomorrow's primaries in Arizona and South Carolina and the caucus in New Mexico, Democrats will vote in primaries in Missouri, Delaware, and Oklahoma. Another caucus will take place in North Dakota. A total of 269 delegates are at stake.

Whoever wins the Democratic nomination could face a close race against President Bush, at least according to the latest polls.

Earlier, I spoke with an adviser to the president's reelection campaign, Mary Matalin. And I began by asking her whether the president's decision to appoint that new commission to investigate intelligence failures marks a significant policy and political retreat.

(BEGIN VIDEOTAPE)

MARY MATALIN, BUSH-CHENEY CAMPAIGN ADVISER: The president's concerned, as well he should be, as well as anyone concerned about global peace and security should be. Clearly, something was amiss in the intelligence. Not just our intelligence. The intelligence from around the world. The intelligence that drove the United Nations' unanimous vote in the Security Council to disarm Saddam.

So there, to the extent that we need to fix something, that is obviously what the president wants to do, looking into it. And those who would want to play politics with this very big and tough issue, as opposed to trying to figure out how to fix what led us astray, are not doing any service to America or peace around the world.

KING: Let's take a look at the campaign. You are on the road, a number of Bush-Cheney surrogates out on the road at a time the Democrats are hitting the president pretty hard. It appears to be having some effect, as voters listen to the Democrats, the president's polling numbers have changed.

I want to start with this one polling number, the current Democratic frontrunner is Democratic Senator John Kerry of Massachusetts. In a new CNN poll out today, Senator Kerry beats the president, 53 percent to 46 percent, in a hypothetical November head- to-head. A sign to you that, as the campaign unfolds, the president's position is weakening?

MATALIN: No. There hasn't been a campaign, John, as you know. They're all over the field. We're not evens suited up. And their whole, entire campaign strategy has been to just bash Bush. If they think that they're going to win by purely and solely attacking the president, not offering any alternatives, they're sorely mistaken. And the president has yet to get out there and campaign. He has a spectacular record to run on.

Three years ago, there was -- our military did not have its resources in place to protect us. We didn't have Homeland Security. We did not have a strategy for education. We had no health care reform. We have a spectacular record to run on. We're looking forward to running on it.

But more importantly, we have a vision for the future. They don't have a vision for the future. They don't have any platform for the future. They have one and only one campaign strategy, and that's to beat up on the president. So...

KING: You call it "beating up on the president," Mary, but whatever it is, it is having an impact. If you look at the same poll, as well, our new poll, the president's approval rating, now at 49 percent. Just a couple of weeks ago, it was at 53 percent. One month ago, it was at 60 percent.

The president is clearly descending in terms of his approval rating.

MATALIN: We are really looking forward to having their -- choose their nominee, so we can compare and contrast our record to his record and our vision for the future to theirs. And then we'll see where the numbers are.

This is nothing more than had been predicted by the campaign, that these numbers would dip after a period of time. When there's no defense, there's no correction of all the untruths that they've been putting out there, this is what happens.

KING: We will know a lot more tomorrow night after the seven contests, including the primary in South Carolina and elsewhere, but is it the campaign assumption right now that John Kerry will be the Democratic nominee?

MATALIN: It's hard to make assumptions about the other side. We have nothing to do with their process. It's been interesting to watch. And we -- you know, it looks like that, but you know, two weeks ago, the punditocracy thought it would be Dr. Dean. So we'll see.

KING: The punditocracy. On that note, Mary Matalin, we need to end. Thank you very much for joining us from St. Louis.

MATALIN: Thanks, John. Thanks for having me. (END VIDEOTAPE)

KING: Coming up next, a growing controversy over whether children should be allowed to take antidepressant drugs designed for adults.

Plus, our special report, "Broken Borders." We'll meet an Arizona family so frustrated by the federal government's failure to keep illegal aliens out of the country, they're taking matters into their own hands -- those stories and a great deal more just ahead.

Stay with us.

(COMMERCIAL BREAK)

KING: Turning back now to the controversy over prewar intelligence on Iraq. Tonight, the British government said it is prepared to hold its own investigation into the intelligence used to justify the war in Iraq.

Earlier today, President Bush announced a presidential commission to review U.S. intelligence. Democratic Senator Jay Rockefeller is vice Chairman of the Senate Intelligence Committee. He says that presidential commission should start its work as soon as possible.

Senator Rockefeller joins me now from Capitol Hill.

Senator, thank you for joining us tonight. This is a commission called for by David Kay, the former chief weapons inspector, called for by many members of Congress, mostly Democrats, but some Republicans. And it now will be a commission appointed solely by the president, no input from members of Congress, at least no official authority by members of Congress to appoint its members.

Is that satisfactory to you, sir?

ROCKEFELLER: That's completely unsatisfactory, and for very plain and sensible reasons.

If the report is going to have any credibility with the American people or with the international community -- and we need both of those very much now -- it cannot be appointed by a president whose administration may be included in part of the inquiry and the investigation.

For example, was intelligence listened to? Was it used? Were there separate sources of intelligence? There are a lot of questions. What about the hyping of the whole thing? It's not just a question of prewar intelligence and what he wants to do. It's a question of all of the aspects of the administration, the Congress, and the intelligence community.

Look, the intelligence community was wrong about the intelligence. The Congress was wrong. The White House was wrong. It would be so much better if we all just admitted that, got our, you know, problems out of the way on that, and then went ahead and tried to make sure that this never happened again.

KING: But with the president controlling the appointees to this commission, you'll have a presidential commission. Your committee is looking at this. You've asked the committee to do even more than it is doing now. On the House side, they're looking at this. There are internal reviews in the administration.

Are we going to get three, four, five, reports, three, four, five answers, if you will, about what happened? And what happens then?

ROCKEFELLER: If we -- first of all, some of those groups are studying different things.

The Intelligence Committee, that I serve on, is only looking at a small amount of the problem. We're not looking at any possible involvement of the administration itself. We're not looking at the fact that intelligence changed radically between the year 2002 and 2003, that it became a much more pro-war type of intelligence. Was this influence from the White House or was it not? Was the president himself involved? Was Cheney involved? Was Rumsfeld involved?

These are not hostile questions. I presume nothing. But I want an honest report. The American people need that honest report. And so does the world community at this point.

KING: Has there been any outreach from the administration? Obviously, you disagree with the approach the president is going to take. One way to dial that back some would be for the president or the vice president to be in touch with fellow Democrats, like yourself, saying, suggest a name, Senator. Suggest a process through which we do this that is acceptable to you.

Any outreach like that?

ROCKEFELLER: No, no outreach to me, at least. And I've not talked to any Democrats that have been reached out to.

My suggestion would be to have a congressional committee mandated by the Congress to do this, with White House appointing people, with Republicans appointing people, Democrats appointing people, not necessarily within our own ranks, but have it a voice of the American people looking at accountability.

Look, I think this was a predetermined war. I may be right. I may be wrong. If I'm right, then that means that the White House was involved. And they have to be called to account to explain that I was either right or wrong. But if we can't talk to them, we'll never know that.

KING: Senator, this process, as outlined by the White House, is going to take months. Whether you like it or not, we're looking at a process that will take months. The committee's investigation will take months more.

What about right now? What do you say to the American people when we hear reports that now Pakistani government saying its top nuclear scientists did share secrets? We see the disclosure from Libya. We have the focus on Iran. There is the continuing mystery over what is happening in North Korea. What is the state of U.S. intelligence right now? And, in the short-term, is there one or two things that you think must be done at the CIA now, today?

ROCKEFELLER: We obviously have to -- I mean, that's the whole reason for us all to admit that we made a mistake on this and to go forward with integrating the American intelligence community, which is in fact 14 different agencies.

We have got so much work to do to prepare us for the world which is in fact upon us. And we're not doing it, because we're sort of looking around who to blame. I'm not trying to do that. But the American people -- one thing Americans do demand, and rightly so -- and we're unique in that -- is accountability. They want to know who was involved and not who is to be blamed, but what is the true story?

And you can only do that -- you can never do that if you have a president investigating his own administration, appointing his own people and them appointing their own staff.

KING: Senator Jay Rockefeller, vice chairman of the Senate Intelligence Committee, sir, we thank you for your thoughts on this issue tonight.

ROCKEFELLER: Thank you.

KING: I'm sure it will carry on into the months ahead.

And a reminder now to vote in tonight's poll. Do you believe a commission assembled by the president to review prewar intelligence on Iraq can be truly independent, yes or no? Cast your vote at CNN.com/Lou. And we'll share the results with you a little later.

Coming up, the biggest test so far for the Democratic presidential hopefuls. We'll talk to two of the nation's leading political journalists about tomorrow's big contest.

And in "Broken Borders," one Arizona family's personal fight against the flow of illegal aliens into their neighborhood.

And Janet Jackson's Super Bowl flash dance, was it a so-called wardrobe malfunction or a well-planned marketing scheme? We'll have that story and much more.

(COMMERCIAL BREAK)

KING: The Food and Drug Administration today launched an investigation into whether children and antidepressant drugs are a lethal combination. Parents who children committed suicide after taking the pills testified at an FDA hearing and pleaded with the agency to ban prescriptions of antidepressants to children.

Medical correspondent Christy Feig has the report -- Christy.

CHRISTY FEIG, CNN MEDICAL CORRESPONDENT: Well, John, it was indeed an emotional morning at that FDA Advisory Committee meeting. Some parents blamed their children's deaths on the very drugs they expected would stop their children's depression.

Terri Williams' 14-year-old son was on antidepressants.

(BEGIN VIDEO CLIP)

TERRI WILLIAMS, SON COMMITTED SUICIDE: After four weeks of treatment, he began to show signs of agitation, which we were not aware that was a potential side effect. And after seven weeks of treatment, he hung himself.

(END VIDEO CLIP)

FEIG: Still, other parents credit the exact same medication for saving their children's lives.

(BEGIN VIDEO CLIP)

DR. SUZANNE VOGEL-SCIBILIA, NATIONAL ALLIANCE FOR THE MENTALLY ILL: I have two children who have been on antidepressant medication, have done very, very well, and lead full lives. And so I shudder to think what would happen to them if these medications weren't available.

(END VIDEO CLIP)

FEIG: Now, only one of the antidepressants in this class of drugs has been approved for use in children, and that's Prozac. All of the other ones have been approved for use in adults only. But, by law, doctors can also prescribe them for use in children, and they do.

Take 2002, for example. More than 10 million prescriptions were written for five of these antidepressants, all in patients under the age of 18. Now, this issue first came to light last year, when the British government sent a warning to doctors there, telling them that certain antidepressants may actually increase a child's risk of committing suicide.

For now, the FDA has advised doctors here in the United States to monitor their pediatric patients very closely. But they have not said, don't prescribe them yet. They're going to analyze some more data that they've asked these pharmaceutical companies to provide. And they'll get their final recommendation out later this year -- John.

KING: Christy Feig in Washington, thank you very much.

And, tonight, the Democratic presidential hopefuls are campaigning across seven states slated to hold primaries and caucuses tomorrow. In total, those seven states represent 12 percent of the delegates needed to clinch the nomination.

Joining us now, two of the country's most respected political journalists who just returned from South Carolina. Ron Brownstein, national political correspondent for the "Los Angeles Times," and the CNN political analyst and Roger Simon, political editor of "U.S. News and World Report."

Gentleman thank you.

Let's start with our new poll out today. Very interesting findings. If you look at the head-to-head match ups, the president against the leading two Democrats, at least the leading two Democrats of recent weeks, against the current front-runner, John Kerry. John Kerry is running aid head right now, 53 percent to 46 percent. If you look at President Bush against the former Democrat Democratic front- runner, Governor Howard Dean, Bush gets 52 percent, 45 percent.

that has to help senator Kerry as he's campaigning for presidential votes -- yes, Roger.

ROGER SIMON, "U.S. NEWS & WORLD REPORT": Oh, sure. And I think we are seeing the result of almost a year of relentless attacks against the president. It's taken its toll. Obviously while the stock market is recovering, jobs are not recovering, there's no job creation going on in the United States. The future of the economy is still in question. The future of the Iraq occupation is still in question. And John Kerry at least looks like a reasonable alternative to those who were polled.

Ron Brownstein, Mary Matalin was on the program earlier, saying this is just what they expected. They are not worried the president's numbers are down. The Democrats have the stage to themselves.

Do you agree with that, this is simply the result of a Democratic attack or does the president have a larger problem?

RON BROWNSTEIN, "LOS ANGELES TIMES": I agree up to a point. I mean, obviously, the fact that they Democrats are dominating the news week after week making their case against the president is a factor here. And as Mary Matalin said, the Republicans have not begun really -- just starting to make their case against the Democrats. But the number that has to be more troubling than the head-to-head matchups is the approval rating. John, that really is the key variable in an election with an incumbent president. We've had an incumbent presidents with approval ratings well over 50 percent, they've all won comfortably for reelection. Whether Eisenhower, Nixon, Reagan or Clinton. Right now, we have President Bush down under 50 percent. At any time an incumbent gets there, it is going to be a difficult election. So that's the one that I keep the closest eye on through the election year.

KING: Now, Roger, help me understand, what happens after tomorrow night?

Seven contests, to hear the candidates they all plan to keep going after tomorrow. Joe Lieberman says he wants to win at least one state, Delaware is his target. General Clark says maybe Oklahoma. Senator Edwards, of course, has said he must win in South Carolina.

Is there a point and is it tomorrow night when this field has to shrink?

SIMON: I think there is, and I think it's going to start tomorrow night. If Joe Lieberman doesn't win anywhere, and he might not win anywhere, I think there's going to be a lot of pressure for him to get out of the race. I don't think he'll have any money. If General Clark doesn't win in Oklahoma, which he's very narrowly ahead in polls there, I think there will be pressure on him to leave. Edwards says he has to win South Carolina, his home state. He's a senator from the neighboring state. And that leaves Howard Dean, who isn't expected to win anywhere tomorrow, probably won't do better than third in any of those states but says he's still looking toward the future, he's looking toward Wisconsin and Maine and California, and Washington and states where he expects to do well.

KING: Ron Brownstein, can there be success to that strategy?

Dean essentially saying I'm not going to play this week because it would cost too much money and I might not win anyway, so I hope I'm the guy they come to as the anti-Kerry?

BROWNSTEIN: I think it's very tough obviously, John. The big problem, you saw it even in the national poll, Governor Dean, has had over the last month his credibility as a potential president has enormously eroded. I mean, he's not only trailing in the states, but performing woefully in polls when we ask questions who's best prepared to be commander in chief, who has the temperament to be president. He's lost a lot of credibility, and if you keep losing states it's hard to rebuild that credibility. All the Democrats have the same challenge. They have to find a case against the front-runner. The less to me, of the week between Iowa and New Hampshire and February third is, if you don't make -- if you don't give voters a compelling reason not to vote for the front-runner, guess what, most of them are going to do it. And I think the challenge for the Democrats, even if they can survive, John Edwards and Wesley Clark, is to find a sharper argument to make against John Kerry. John Edwards is relying on South Carolina almost entirely that he's from there. Well, you can't be from all 50 states. At some point you have to have a stronger argument than that. They've got to find it soon or Tennessee and Virginia could ring midnight for them.

KING: Roger we've seen in recent days, the pendulum if you will, swing the other way. It was Governor Dean getting a great deal of scrutiny two weeks ago. Now it is Senator Kerry. People questioning campaign contributions in the past. People looking through his record in the Senate.

How is he handling this?

SIMON: He's handling it as best as he can. I mean, all these guys face the same problem, and it's a problem that George Bush faces with the accusations that he was AWOL during his years in the Air National Guard in Texas. It's that nothing is really ever dead in politics. You really never put any issue behind you, if you're going to keep running for a higher elective office. Michael Dukakis thought Willy Horton was a dead issue, he had dealt with that. John Kerry says he's answered all of these charges. This is old stuff. Yes, he's taken money from lobbyists. No, he doesn't take PAC money. Yes, he takes money from special interests. And it's all behind him. But the fact is, that as long as you're going to keep running in campaigns, the media at the very least and your opponents at the very least are going to keep raising this stuff and trying to use it against you.

BROWNSTEIN: John, If I could just jump in there. One thing that's relevant here, I think, is that all the of the Democrats, to a considerable extent, have exposed themselves to this kind of argument. Because they're all relying so heavily on this very intense populism, anti-Washington argument, all portraying Washington as sort of a sink of corruption. The logical comeback from the media and certainly from the Republicans is John Kerry you took money from lobbyists. John Edwards, your taking money from trial lawyers. Wesley Clark, you were a lobbyist. I mean, they've all built glass houses that invite people to throw stones, and I think that's what they're experiencing.

KING: All right, gentleman, we need to end it there for tonight. Ron Brownstein of the "L.A. Times," Roger Simon, "U.S. News And World Report, thank you both gentleman.

Immigration reform has been one of the hotly debated issues on the campaign trail. Tonight, in our series of special reports "Broken Borders," one Arizona family fighting reform in their backyard. To this family the massive movement of illegal aliens in this country is a threat to their home and their livelihood.

Casey Wian, reports from Hereford, Arizona.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Like many parents Cindy Kolb takes here daughter to the bus stop every morning. But unlike most, she's packing a .38 to protect against the illegal aliens and smugglers that sneak through her rural Arizona community.

CINDY KOLB, ARIZONA BORDER RESIDENT: They slept in our neighborhood last night. They slept in our fields. And our kids walk past them going to the bus stop. They're under the roads. They're everywhere.

WIAN: Just seven miles from the Mexican border, Hereford has become a thoroughfare for illegal aliens.

KOLB: Border Patrol is totally overrun. There's no way that these men can collect up all the people that cross this border every night.

WIAN: So, Cindy and her husband Ed, along with some of their neighbors regularly patrol these mountains and gullies looking for illegal aliens.

KOLB: Here we go.

WIAN: It doesn't take long. (on camera): Less than five minutes after the Kolbs dropped their daughter off at the bus stop and just a few hundred yards down the road we encountered this group of suspected illegal aliens who were apprehended by an undercover border patrol agent.

(voice-over): Three days after our visit another local woman taking her daughter to school was car jacked by three illegal aliens who are now in custody. Critics call some of the citizens groups that patrol the Arizona border vigilante. They do apprehend people as this amateur video shows and detain them until the Border Patrol arrives. But they also give them food and water. The Kolbs say they never have drawn their weapons.

ED KOLB, ARIZONA BORDER RESIDENT: You never know who you're going to meet, and what country they're from. They are not just all from Mexico.

WIAN: Illustrating that point, we found this Brazilian bus ticket, along with discarded clothes, trash and human waste at one several local alien smuggler hiding spots. The environmental damage to their neighborhood is one reason this battle is personal for the Kolbs. There's also the failure of their construction business which they blame on illegal labor.

KOLB: We could never meet or win a bid because we paid American men living wages. And other contractors were hiring illegals, and paying them below minimum wage.

WIAN: Ed works for another company now while Cindy spends much of her time patrolling the neighborhood hoping to embarrass the federal government into controlling the border.

Casey Wian, CNN, Hereford, Arizona.

(END VIDEOTAPE)

Coming up next much more on the president's new spending plan with White House budget director Josh Bolten. Plus, "Exporting America." Software programmers whose jobs at IBM were shipped overseas are now taking on the federal government. That and a great deal more just ahead. Stay with us.

(COMMERCIAL BREAK)

KING: Exporting America tonight. Many of the hundreds of thousands of Americans who have lost their jobs to cheap foreign labor markets are eligible to receive help from the federal government. However, workers in the service sector are not. That has prompted former employees at IBM's global services division to file a lawsuit against the federal government. Bill Tucker has the report.

(BEGIN VIDEOTAPE)

BILL TUCKER, CNN CORRESPONDENT (voice-over): If a worker makes these, or this, or works here and loses their job to foreign competition, they qualify for federal assistance under a program known as the trade adjustment act, which provides income support, training benefits and help with job searches. But if you're a software programmer who's lost a job to foreign competition, you don't qualify. Lisa Pineau, a software worker, is a plaintiff in a lawsuit which is seeking to change that.

LISA PINEAU, UNEMPLOYED SOFTWARE WORKER: I would like to retrain perhaps in another field that's more in demand. I don't believe there's a choice right now of staying in the tech field. Most of the jobs are pretty much being sent overseas.

TUCKER: The Labor Department will not comment on the pending suit, but they do point to the trade adjustment act reform of 2002, which says, the benefits are for workers who make products or articles. Software is not an article, says Labor, it is a service.

MICHAEL SMITH, PLAINTIFF'S ATTORNEY: Clearly the Labor Department has been entirely and completely incorrect in their determinations that software workers do not create an article.

TUCKER: In Congress, there are already efforts to accomplish legislatively what Smith is trying to do in the courts. Congressmen Adam Smith and Charles Rangel are preparing a bill they plan to introduce in the house in the next couple of weeks to extend benefits to workers of service companies. Clearing up any ambiguity in the law.

REP. ADAM SMITH (D), WASHINGTON: When people first started being concerned about jobs being lost to competition from overseas, it was primarily in the manufacturing sector. That is where the changes were occurring. While in the last four or five years, we've started to see it happening in the service sector as well.

(END VIDEOTAPE)

TUCKER: This is not the first time Congress has considered expanding benefits to the service sector. The reform of the trade adjustment act in 2002 originally included the service sector, but it was dropped from the bill because, John, Congress deemed it at the time too -- potentially too expensive.

KING: Thank you very much.

Now, returning now to one of our top stories. The president today sent Congress a new $2.4 trillion budget. My guest says the plan will put the White House on track to cut the $0.5 trillion deficit in half within five years. Joshua Bolten is the White House budget director. He joins us now from the White House.

Josh, nobody seems to be happy with this budget. I want to share with you some of the criticisms from your fellow Republicans on Capitol Hill tonight. The budget chairman, Jim Nussle, says Congress needs to look for ways, faster deficit reduction and to reduce spending. The appropriations chairman Bill Young, again another Republican says, your numbers simply do not add up. How do you answer that? JOSHUA BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Well, we're going to find people on all sides of the spectrum who are going to have concerns. We think we're putting forward the right kind of plan. Some folks are going to think we're not leaving enough room for spending, and other people are going to think we ought to tighten down some more.

The president's putting forward a good plan that meets the priorities of this nation, which are to protect the national security, protect the homeland, and restore robust economic growth to the economy. And then be tight with all the rest of our spending. That's what his plan does. We're bound to have a lot of divergence of views on the hill. But I think we've got a very good chance of getting this president's budget or something pretty close to it adopted on Capitol Hill.

KING: We know as we speak tonight that there will be U.S. troops in Afghanistan come November and December of this year. There will be some U.S. troops in Iraq come November and December of this year. The numbers still to be determined. And yet the budget does not include any money for them. The administration is saying it will revisit that question down the road when it has a better sense. Isn't that irresponsible in the sense that you know you will be spending something? Why would you not put that in the budget plan?

BOLTEN: Not at all The key is what you just said. We don't know what the number is and spending on contingencies and emergencies like a war are commonly handled through supplementals. But we haven't tried to hide that, we put it right in the front part of the budget document saying that for the coming year, we're going to need to spend something extra to support our troops in the field in Iraq and Afghanistan.

Right now, that spendout rate for '04 is somewhere below $50 billion. I would hope we could do something below that. But we don't know what the number is until we know what the security situation is like. And we'll put that into the budget when the time comes with a supplemental. There's no hiding going on here. Those numbers need to be added in.

KING: Critics say this president took office at a time of record federal surpluses, now has a budget that envisions record federal deficits. And what he's essentially saying is I'll cut the deficit in half in five years, promise, but you need to reelect me first.

BOLTEN: Look, let's revisit why we're in the situation we're in. The projected surpluses, while they were -- the projections were made in good faith by estimators all across the spectrum, just turned out to be flat wrong. Those surpluses didn't really exist. What we actually had was a recessionary economy which the president inherited, with a war on top of it. So given where we've been, it's not at all surprising that we're in the kind of deficit situation we're in.

The most important factor for the deficit situation we're in is in fact the flagging economy. The tax cuts that the president has proposed and the Congress has enacted are bringing us out of that flagging economy, and the worst thing we could do right now is think about raising taxes back up, because that will choke off economic growth, and that will choke off our ability to bring this deficit back down in a responsible way as the president's budget does.

KING: We are having this conversation in a campaign year. You're well aware of that. The Democrats look at this and they see a 7 percent cut in the Environmental Protection Agency. They see some housing programs that are being cut, or at least the growth scaled back. And they say this was a president who said he was a compassionate conservative. Where's the compassion?

BOLTEN: There's plenty of compassion in the budget, especially for those things the president has identified. When you look at the Environmental Protection Agency, we are finding cuts there, but not in the program dollars that they need to spend. We're finding administrative cuts, things like that. Housing spending is in fact going up, it's not going up as fast as some people would like. But people want to spend more on everything.

We can't spend more on everything. We need to focus on the priorities. And the priorities are, the national security, homeland security, and restoring robust economic growth. In the other areas we can meet our priorities, but what we also need to do is do some belt- tightening. We got a lot of support on Capitol Hill. I'm optimistic about this budget.

KING: Josh Bolten, optimistic tonight. We'll see how you do in the signing of this budget in the days and weeks ahead. Thank you for joining us.

BOLTEN: Thank you.

KING: And tonight's thought is on government spending. "Any government like any family can for a year spend a little more than it earns. But you and I know a continuation of that habit means the poorhouse." Those words from Franklin Delano Roosevelt.

Coming up. Another Jackson makes headlines. Outrage over Janet's halftime flash dance. The FCC calls for an immediate investigation. And we'll hear some of your thoughts on the issue.

(COMMERCIAL BREAK)

KING: The Super Bowl was by all accounts a fabulous game. Yet most of the attention tonight is coming from the halftime show. Public outrage over a revealing scene from that halftime show on CBS last night. One performer, Justin Timberlake, ripped off part of Janet Jackson's costume. A move many Americans felt was over the line. Among those who were offended, the chairman of the Federal Communications Commission, Michael Powell, who ordered an immediate investigation. Peter Viles reports.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): As they say in football, flag on the play. At first it appears to be illegal use of the hands, maybe unsportsman-like conduct. Justin Timberlake says it was a wardrobe malfunction. But on further review, many of those who watched at home said this little flash dance was no accident.

UNIDENTIFIED MALE: It was planned, and disgusting, and on public television. Very inappropriate.

UNIDENTIFIED FEMALE: I think it was on purpose.

TOURE, ROLLING STONE: Of course it was planned. Justin says, "I'm going to get you naked by the end of the song." He rips it off. It comes right off. And there's a silver pasty protecting what you can't see. Of course, she knew.

VILES: Among the angriest viewers, FCC Chairman Michael Powell, who ordered an immediate investigation, targeting MTV and CBS.

MICHAEL POWELL, FCC CHAIRMAN: I thought it was outrageous, and I was deeply disappointed as I sat there with my two children. And I knew immediately this would cause great outrage among the American people. Which it did.

VILES: In its apology, MTV, the producer of the incident said, quote, "The tearing of Janet Jackson's costume was unrehearsed, unplanned, completely unintentional." CBS, which aired it live, said it "deeply regrets the incident," apologized to anyone offended.

BRENT BOZELL, PARENTS TELEVISION COUNCIL: The blame game has got to stop with Viacom. Viacom owns CBS, Viacom owns MTV. The producers for CBS. Viacom is responsible, and the fines ought to go to every CBS affiliate owned by Viacom that aired this.

VILES: Now, we did find some viewers who were not offended.

UNIDENTIFIED MALE: Oh, I thought it was terrific. I thought it was great. Great. It was real great theater. I thought she was wonderful. And she was actually obviously prepared for it. She was wearing a pasty. So what's the big deal?

VILES: And lucky for CBS, the nation's first viewer, the president, didn't see it. He says he went to bed after the first half.

(END VIDEOTAPE)

VILES: This is, though, a serious case of bad timing for CBS. The FCC was already coming under pressure to crack down on indecency. And Powell says it is conceivable every single CBS affiliate could face a fine here. The fine per station would be $27,000 if they hit the maximum fine -- John.

KING: A deadline on when they'll make that decision?

VILES: No, they said they would do this very thoroughly and very quickly.

KING: Peter Viles, thank you very much. And now for a look at some of your thoughts. Many of you wrote about that incident during last night's halftime show of the Super Bowl.

Michael Garcia of Fullerton, California: "Good thing CBS didn't allow advocacy ads like MoveOn.org. Instead, CBS viewers were treated to flag desecration and exposed breasts. Good thing CBS has such high standards."

David Smith of Sacramento, California: "Let me try to understand this. We can investigate Janet Jackson's breasts immediately, but it will take months to find out who outed our CIA agent. I suggest that the apparently limitless funds of the FCC be shifted to an independent investigation of who the traitor is."

We love hearing from you. E-mail us, as always, at loudobbs@cnn.com.

Wall Street opened a new trading month. Little change. The Dow rose 11 points, the Nasdaq lost 3. The S&P added 4. Also in lower Manhattan, Martha Stewart's trial on fraud charges resumed after an unexpected delay last week. Christine Romans is here with the market and Martha -- Christine.

CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Well, John, first, defense stocks rallied very nicely today on that defense-heavy Bush budget proposal. So there was some strength there. But overall, market gains muted because Wall Street is obsessed with jobs growth. A manufacturing number was the best in 20 years. But the employment part of that number disappointed, and wages in December fell .3 percent. Many say the only winners in this job markets are the multi- national companies moving jobs overseas.

(BEGIN VIDEO CLIP)

RICHARD TRUMKA, SECRETARY TREASURER, AFL-CIO: Not only do they move offshore right now, we actually reward them through the tax code for moving offshore, and that is pure lunacy.

(END VIDEO CLIP)

ROMANS: AFL-CIO taking that case to Washington this week, and Wall Street waiting for Friday's jobs reports, John, for signs of life in this jobs market.

KING: So a few blocks from the stock exchange, Martha Stewart's stock trial continues. And?

ROMANS: And today it continued. More -- we're going to get the star witness tomorrow, but today a lot focusing on a rushed phone conversation December 2001. It was that day of her suspicious stock trade. A former ImClone assistant said a hurried and harsh Martha Stewart called ImClone and wanted to speak with founder Sam Waksal. He was unavailable, and the ImClone assistant entered in the phone log that day, John: "Martha Stewart. Something is going on with ImClone and she wants to know what." Stewart's accused, of course, of lying to authorities who were investigating her sale of ImClone stock that day, the day before bad news from the Food and Drug Administration. As I said, the star witness expected to take the stand tomorrow afternoon.

KING: Expected. Christine Romans, thank you very much.

And coming up, no winter break. The groundhog has made his prediction, and it's not pretty.

But first, an update of the list of companies our staff has confirmed to be exporting America. These are the U.S. companies either sending American jobs overseas, or choosing to employ cheap foreign labor instead of American workers. Tonight we add Sanmina- SCI. Please keep sending us the names of the companies you know to be exporting America that are not already on our list. For the companies list, the complete list, log on to cnn.com/lou. We'll be right back.

(COMMERCIAL BREAK)

KING: Now the result of tonight's poll. Three percent of you, 3 percent, believe a commission assembled by the president so review pre-war intelligence on Iraq can be truly independent; 97 percent of you say not.

And finally tonight, the verdict is in. The world's most renowned forecaster has issued his prediction. Punxsutawney Phil, the undisputed king of weather-forecasting rodents, emerged from his hole in the ground in Pennsylvania early this morning. He saw his shadow, which signals six more weeks of winter.

While Phil may be the gold standard when it comes to groundhogs, he has inspired wannabes across the country. Among them, French Creek Freddie of West Virginia, Buckeye Chuck from Ohio, and General Beauregard Lee from Georgia. But the Punxsutawney Groundhog Club says it welcomes the competition. They say, of course, imitation is the sincerest form of flattery. Either way, the forecast says bundle up for the next six weeks.

And that's our show tonight. Thanks for being with us. Tomorrow, Lou will be back, and he will be joined by the chairman of the House Ways & Means Committee, Congressman Bill Thomas. For all of us here, good night from New York. Anderson Cooper is next.

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Mary Matalin; Super Bowl Controversy>